Evercore raises Apple price target to $247

Three new iPhones before the end of the quarter is materially better than last year, says analyst Amit Daryanani.

From "Could the iPhone 11 Surprise?" a note to clients Saturday that landed on my desktop Sunday:

ALL YOU NEED TO KNOW: We think there is inherent upside to Sept-qtr EPS given AAPL isn’t staggering their launches but announcing all the three products simultaneously. This we think will have a positive impact to revenues and EPS in the sept-qtr, though depending on the reception of these products it may be more of a pulling in of revenues from Dec-qtr. We think AAPL will likely be more aggressive with their trade in programs to further incentivize customers to purchase the new phones. In addition, we see the pricing of the iPhone 11 (next gen iPhone XR) as fairly attractive at $699 that could spur demand on the low-end.

Net/net: we are raising our Sept-qtr and beyond estimates modestly to reflect the change in product launch timing and we see room for upside to current street numbers esp. for Sept-qtr. Fundamentally, AAPL remains a core large cap tech holding and we see the stock continuing to re-rate higher given multiple tailwinds on the services side...

Key levers for upside include: a) services growing double-digits with potential acceleration given new revenue streams, b) gross margins inflecting higher for the remainder of the year given easing commodity costs and better leverage, c) cap allocation enables 2-4% share reduction, and d) non iPhone hardware sales inflect higher and have better margins.

Maintains Outperform, raises price target to $247 from $238.

My take: Evercore, alas, does not have as much sway on the Street as Goldman Sachs.

14 Comments

  1. Gregg Thurman said:
    I think you are projecting your own feelings about GS too far.

    Since 2008 GS hs been trying to reshape it’s business to be customer centric. To that end GS has been offering early retirement to a host of mid and upper level managers, replacing them with younger “customer oriented” hires.

    No shift in directive is without pain.

    I see the partnership with Apple is very good for both firms. In partnering with Apple GS is going to learn customer experience from the beast. In partnering with GS Apple has a partner willing to do things the Apple, much like ATT with the iPhone.

    They will both take what they want/need from the partnership while giving to the other.

    During the 18th, 19th and 20th centuries the US was just as bad as the Europeans in exploiting smaller, defenseless countries. Remnants of that past continues today, but the US isn’t the same country today it was then and is getting much better.

    My point is that while GS’s focus and expertise used to be corporate banking, today it is consumer focused. Those are two different skill sets and it will take time, like the Titantic, to change direction.

    Given the degree of its new focus, and the resources it has, I would expect GS to successfully complete the transition, benefitting Apple along the way.

    Further, just like Apple’s deal with ATT, I suspect the GS partnership will dissolve (by mutual and planned agreement) in 5 years.

    2
    September 15, 2019
  2. Robert Paul Leitao said:
    The most impactful line in the coverage: “Fundamentally, AAPL remains a core large cap tech holding and we see the stock continuing to re-rate higher given multiple tailwinds on the services side”.

    Although broadly held, Apple remains underweight in many institutional portfolios.

    I’m not concerned with the September quarter’s iPhone performance. I am concerned with the pace of repurchases while the shares remain under $250. Not only in my view are the shares continuing to sell at a discount, the services revenue potential continues to be overlooked in most analysis. While analysts mention Apple’s services segment, its 3-year growth potential is hardly considered in valuation models while the focus remains primarily on the iPhone line.

    I like the $247 price target. Mr. Daryanani is making an effort to get it right. The iPhone 11 models are attractively priced. This year’s iPhone models will perform well as gateways for the delivery of rich and robust services for consumers.

    6
    September 15, 2019
  3. victor castroll said:
    dumb af.

     gonna get smoked tomorrow.

    good thing i’m short

    way short.

    g/l fanbois

    1
    September 15, 2019
    • Michael Thompson said:
      @Vicky You and your money shall soon be parted. I’ll be laughing. Is your mortgage paid off?

      2
      September 16, 2019
    • David Emery said:
      Close, 16 Sep
      NASDAQ, -0.28%
      AAPL, +0.53%

      (I think it’s appropriate whenever considering Apple performance, particularly in the short term, to compare it to the NASDAQ as a whole.)

      0
      September 16, 2019
    • Aaron Belich said:
      How much did you lose?

      0
      September 16, 2019
  4. Fred Stein said:
    “Like” the target and the rationale; And the Sept 10 announcement has two strong positives:

    1) Aggressive pricing across the board shows confidence in the long term, especially in setting up long term services annuities.

    2) Apple has internally diversified its revenue streams with growth from new devices and services. Diversification reduces risk, which combined with lower 10 yr T bill rates, reduces the IRR discount, which increases the NPV of future cash flows.

    Amit and a few others see this. Many still fixate on iPhone units, margins, and rumors.

    2
    September 15, 2019

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